Xiaomi's quest to become next Apple hits roadblock

Chinese tech giant Xiaomi has hit a serious roadblock in its expansion plans, with research showing sales of its smartphones may be on the verge of plummeting.Business Insider | August 01, 2015, 17:34 IST

The Chinese smartphone maker launched in India last year, with its product becoming an instant hit in the market, with inventory running out in minutes. Founded by serial entrepreneur Lei Jun, Xiaomi is said to have recorded sales of $12 billion in 2014 April 2015STATUS NOW: Xiaomi is the world's most valuable privately-held tech startup, with a fi nancing round in December 2014 pegging its worth $45 billionChinese tech giant Xiaomi has hit a serious roadblock in its expansion plans, with research showing sales of its smartphones may be on the verge of plummeting.

Research house Strategy Analytics revealed the trend in its Q2 Mobile Trends report where Xiaomi is listed as the fifth-largest phone vendor in the world.

For those that don't know, Xiaomi is a growing technology company that has become famous for its ability to create affordable smartphones with top-end internal specifications.

In December 2014, The Wall Street Journal reported Xiaomi had become "the world's most valuable tech startup," listing it as being worth at least $46 billion.

Traditionally it has only sold its handsets in China. Xiaomi confirmed plans to enter new markets in 2015 earlier this year. The move has seen Xiaomi expand into India, Malaysia, Thailand, Vietnam, the Philippines and more recently Brazil, where Xiaomi launched its Redmi 2 smartphone in June.

The Strategy Analytics report showed Xiaomi has enjoyed some growth during the expansion. Key stats include:

In Q2 2015 Xiaomi shipped 19.8 million smartphones, beating the 15.1 million figure reported in Q2 2014. During the period, Xiaomi controlled 4.6% of the global smartphone market, up from the 3.5% stake it held in Q2 2014. While the figures may sound impressive, Strategy Analytics executive director Neil Mawston, believes the figures are a sign Xiaomi's growth is stuttering.

"Xiaomi remains a major player in the China mobile phone market, but its local and international growth is slowing and Xiaomi is facing intense competition from Huawei, Meizu and others," he said.

"As a result, Xiaomi may struggle to hold on to its top-five global mobile phone ranking in the coming quarters."

Local competition may be Xiaomi's biggest problemThe report backs Mawston's argument. According to Strategy Analytics, fellow Chinese technology firm Huawei is the fastest-growing phone vendor in the world.

In Q2 2014 Huawei shipped 30.6 million phones, which marks a near 50% growth on the 20.6 million handsets it shipped in Q2 2014.It overtook Microsoft to become the third-biggest phone vendor in the world, with Huawei now holding a 7% share of the market -- which by comparison Microsoft only has a 6.4% stake.The figures are a problem for Xiaomi because, as noted by Strategy Analytics director Ken Hyers: "Huawei is rising fast in all regions of the world, particularly China where its 4G models, such as the Mate7, are proving wildly popular."

This means Huawei is eating away at Xiaomi's core local customer base. Gartner research director Annette Zimmermann told Business Insider 95% of Xiaomi phone sales in 2015 remained in China, despite its efforts to expand in June.